Return and Volatility Transmission Between Oil Prices and Emerging Asian Markets | Zendy

Sang Hoon Kang | Zendy; 윤성민 | Zendy

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Return and Volatility Transmission Between Oil Prices and Emerging Asian Markets

Author(s) -

Sang Hoon Kang,

윤성민

Publication year - 2013

Publication title -

seoul journal of business

Language(s) - English

Resource type - Journals

eISSN - 2713-6213

pISSN - 1226-9816

DOI - 10.35152/snusjb.2013.19.2.003

Subject(s) - futures contract , volatility (finance) , economics , financial economics , oil price , econometrics , bivariate analysis , portfolio , spillover effect , volatility swap , monetary economics , implied volatility , macroeconomics , mathematics , statistics

We investigated return and volatility transmission between oil futures prices and ten Asian emerging indices using a VAR-bivariate GARCH model. We also analyzed the optimal weights and hedge ratios for optimizing portfolios to minimize the exposure to risk associated with oil futures price changes. We found no significant influence of oil futures price returns on Asian stock returns. However, strong volatility spillover was observed from oil futures price shocks and volatility to counterpart volatilities. In addition, optimal weights and hedge ratios suggested that incorporating the oil asset in a well-diversified portfolio effectively hedged the risks associated with oil price volatility.

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